Assume Jacob pays $100 for his merchandise. He marks it up to $175. He then puts a discount of x% on the $175 price. We are told his profit is 40% so he must have sold the product at $140 (assuming this problem is computing "profit" against cost, which is not the way it is usually done, but computing profit against selling price would not produce any of the answers listed). That means his discount was $35 on a selling price of $175, or 20%.